Irish General Election preview by former Ambassador Sean Farrell

The retired Irish diplomat gives The Irish World his uniquely cogent analysis of what is happening in the run up to next week’s Irish General Election

Sean Farrell, now a successful writer, commentator and blogger, has held sensitive postings around the world, including in Chicago, Belfast and at the Embassy of Ireland in London at a crucial time in the peace process, as a UN observer in Yugoslavia during its civil war in the aftermath of Srebrenica and as Ambassador to Estonia at a crucial time when it and other former Soviet Union nations were rebuilding.

Now instead of reporting back to Ireland from overseas, as guest columnist he gives us his own uniquely cogent analysis of what is happening in the run up to next week’s Irish General Election.

However you look the figures don’t add up

by Sean Farrell

As of now, with just over a week before polling the outcome is unclear. What IS clear is that, so far at least, the Government’s main strategy of stressing the need for continuity to maintain stability is not impressing voters. This may yet change – there was a major late surge to Fianna Fail in 2007, which sufficed to see them returned, and many in government are hoping that Enda Kenny can replicate David Cameron’s late and unexpected victory in Britain last year.

The problem for the Government parties is that their combined support, while not slipping, remains stubbornly below the required levels. Fine Gael has been stalled around the 30 per cent mark for several months, and Labour cannot even maintain half its 2011 level of 19.4 per cent . Different polls pundits and analysts agree on only one thing – that the Coalition will fall short. By how much is unclear. It could be by fifteen seats or more, it could be by less. Local issues, locally popular candidates and the fact that three quarters of the constituencies have been revised add to the mix and make any forecasting an art rather than a science.

Barring a late surge, Independents or smaller parties will hold the balance, with the left threatening a significant breakthrough. Unless of course the hitherto unthinkable happens and Fine Gael and Fianna Fail were to go into government together. This remains the bookies’ favourite at eleven to eight, with ( a lengthening) five to one against for the Coalition.

It may not be a case of snatching defeat from the jaws of victory but there are precedents for incumbents losing when they thought they were a shoe-in. Fianna Fail in 1973 thought a grateful electorate would return them for taking a hard line on security. The Coalition in 1977 thought (hoped) they would be rewarded for weathering a serious economic and energy crisis. They repeated their mistake in 1987, after another economic crisis.

In 1997, with the economy buoyant, the Rainbow Coalition lost out, chiefly because of a sharp decline in support for Labour, which saw its seats – and votes – halved. Labour’s surge in 1992 (to levels replicated in 2011) was seen as the public’s desire to get rid of Fianna Fail; instead Labour kept them in power, and paid the price five years later – proof that in some areas the Irish electorate have long memories. There seems every likelihood that February 26 will see Labour’s cold shower repeated, with the hapless junior partner being blamed for broken election pledges.

So far the election campaigns of both government parties have failed to ignite. Having attempted to garner credit for restoring the country’s economic fortunes, they are discovering that there is very little to attract in promising to continue steady as she goes. Having been told there is economic recovery, the public want some of it – now. Fiscal rectitude was o.k. ( indeed obligatory) when the Troika were dictating economic policy. Once those shackles were removed, it has been back, all too soon, to auction politics, with the political parties, in the words of one eminent commentator, vying to buy public support with the public’s own money.

Or indeed, with borrowed money. For, despite the recovery, despite 2015’s impressive economic growth rate and booming tax receipts, Ireland continues to spend more than it earns. When the Government did a smoke and mirrors job in the last budget, conjuring up funding for tax cuts and some benefit increases, Bertie Ahern was derided for pointing out that this was done with borrowed money, not, as his government did, with large budget surpluses. Over-simplistic, but true. Pent up demand and the dynamics of the electoral cycle prompted the Government to offer modest sweeteners last October, after which there was no going back. The damage was done. The result: with the election pending, with a balanced budget in sight, the government let the egg fall off the spoon, and have been frantically trying to pick it up since.

It is not so much that the hard economic lessons of the last seven years have been forgotten, more that politicians on all sides are again encouraging a sense of entitlement by painting the picture rosier than it is. The recovery is real, but drilling down reveals that it is far from universal, with some parts of the country and some sections of the community hardly touched, and legacy issues remaining. What’s more there’s clearly a way to go before it is complete and before individual finances are back to even approximately where they were.

The current election manifestos overall make sorry reading, with promises of increased spending and, more worryingly, of cuts in taxation (except for those designated “rich” on gross incomes over €100,000), in particular the hated – but lucrative – Universal Social Charge. The tax cuts, if implemented, would erode the tax base. Déjà vu anyone? The Fianna Fail Celtic Tiger budgets were applauded for removing hundreds of thousands from the direct tax net. When revenue collapsed in the Crash, the resulting fiscal crisis saw the country mired in a downward borrowing spiral.

The odious bank bailout – €64 billion – greatly increased our indebtedness and the annual interest payments on that bailout have been a heavy burden. We could have done much with that money. However, even more was required to cover the interest on the annual borrowings to keep the country afloat and pay welfare and wages when tax receipts collapsed (in one year the figure was close to €20 billion). Eventually Ireland’s credit ran out and nobody would lend to us on the open market.

Hence the much maligned Troika which came in and kept the country afloat. The Troika programme – though politically unpopular – was successfully implemented and helped the country back on its feet and the tax base to recover. The danger now is that this hard won improvement will again be dissipated for short term electoral results. Better services and benefits cannot be financed while simultaneously exempting a large proportion of those working from paying tax.

A generation ago, the Government, usually Fianna Fail, balanced the books by inserting an item “fiscal buoyancy” in the budget to cover embarrassing shortfalls. The main parties now are justifying their election promises by reference to a new buzz phrase, “fiscal space” – a euphemism for the wiggle room available to a government to increase spending and/or lower taxes without jeopardising the sustainability and stability of the country’s economy. Not surprisingly, in the hands of the parties’ spin doctors, fiscal space has been massaged to the point where credibility becomes an issue.

For Ireland, which has so recently had the wolf at the door (some would say inside) this could rebound – big time. We are still borrowing, yet the main parties are kiting figures of up to € twelve billion in fiscal space “available” over the next few years to underwrite election pledges, cut taxes and expand services. All predicated on the current favourable international economic climate continuing. Let’s hope, for all our sakes, they get the weather they’re expecting.